MUMBAI, June 12. “They are white collar chors (thieves). They have gobbled Rs 1,000 crore of public money totally. And they are moving around freely. It is time that economic offences committed by white collar chors were taken as seriously by India’s decision-making elite as criminal offences,” sighs police inspector S.G.Mahadik of the Mumbai Police’s Economic Offences Wing.

Part of the core team of the Mumbai Police, Economic Offences Wing, that has been working relentlessly since the last two and half years, Mahadik and his fellow officers earlier this week completed their investigations into the Rs1, 000 crore shoe scam and filed the last of the 89 charge sheets, including the one involving Abu Azmi who is heading the Mumbai wing of Samajwadi Party (SP).

“I am dazed at the kind of people involved in this scam. Starting from Mumbai’s ex-Sheriff Sadrudin Daya to Samajwadi Party’s Mumbai unit chief Abu Azmi, leading who’s who of Mumbai social circuit as well as the suited executives of leading banks were hand-in-glove in this scam,” explain Mahadik.

The Mumbai shoe scam, after the securities scam, is a scam of gigantic proportion. It became known in 1995 after Sudhir Thakre, Joint registrar of the Cooperative Society for Mumbai Division, ordered a survey of the registered societies. The investigating officers and auditors found that most of the societies, especially cobbler societies, existed only on paper.

The modus operandi of the highflying scamsters was simple. They floated fake societies to avail Government funds through various schemes. The main scheme that they took advantage of was the modified Auto finance Scheme (MAS) of the Khadi Village industries Commission (KVIC).

Under this scheme, the cobblers could avail themselves of a loan of Rs 25,000 per annum for three years at 14.5 percent interest, which would be routed to them once they formed cooperative societies. The money would be administered through commercial banks and financial institutions that were refinanced by the Small Industries Development Bank of India (SIDBI).

What is more, the footwear manufactured by them would be given a sales tax exemption on a turnover of Rs 50 lakh. The KVIC would of course authenticate the application before the loan was sanctioned. The 89 accused in this scam fraudently formed fiction societies and then availed themselves of the loans worth crores of rupees and other benefits. The shameful part of the entire scam was that the benefits meant for the cobblers and weaker section of the society were availed by the rich and the moneyed section of the society.

“Not even one percent of the 16,000 alleged cobblers who availed themselves of the loan were genuine. Fifteen societies were floated by these scamsters. Even 15 members needed to form one such society existed only on paper. This is how the deep nexus between the scamsters, government officials and bankers”, explains Mahadik.

The role of the bankers in this mega scam is appalling. Leading bankers of various banks, including seven from Bank of Oman, two from Bank of Bahrain and Kuwait, eight from Saraswat Bank, one from Bank of Baroda, three from Bombay Mercantile Bank, six from Development Credit Bank, eight from Citibank and 16 from Maharashtra State Finance Corporation (MSFC), have been charge sheeted.

It is of little wonder that Justice R.J.kochar of the Bombay High Court observed last fortnight that the bankers had shown undue haste in sanctioning the loans. For example, 800 members had applied for loan on Aug 19, 1991, and within eight days, the entire loan was sanctioned.

“It is a fact that the bankers played a major role in this scam. If an ordinary person goes for a loan of Rs 10,000, he will be asked thousand questions and it will take months to him to get the loan. On the other hand, in the shoe scam crores of rupees were sanctioned as loans by these bankers without even a bit of proper verification,” explains Mahadik.

To compound the woes of the Mumbai Police in this mega scam, all the 89 persons have been charge sheeted are out on bail and for them it is business as usual. “What can I say? These hotshots, including the former Mumbai Sheriff, spent more than 72 days in jail. According to the law, one cannot be in custody ordinarily for more than 90 days. In any case, all of them have hired top lawyers of Mumbai. It is finally up to the court to keep them or leave them”, Mahadik says.

Mahadik sidetracks the issue that most of his senior officers, including the high profile Sanjay Pande, were transferred abruptly while they were on the case.

The loan component of the scam is Rs 79 crore. But if one includes other aspects like evasion of sales tax, octroi etc, the amount is close to Rs 1,000 crore.

By Ketan Narottam Tanna